The finance ministers of the Group of seven advanced economies agreed on Saturday in London on a landmark deal to establish a global minimum tax rate of 15% for multinational companies, which have long cut their tax bills by shifting profits to units based in havens tax, and wrest more taxes from giant tech companies.
Proposal tax rules, setting a minimum rate of 15%, would be levied on the 100 largest and most profitable companies in the world with minimum profit margins of 10%, including tech giants Google, Amazon and Facebook.
The agreement aims to end the practice of countries competing against each other by lowering their tax rates to attract investment from large multinational corporations, a process that U.S. Treasury Secretary Janet Yellen has called a “30-year race to the bottom on corporate tax rates. companies ”.
G-7 finance ministers have said they are looking to reach a final deal on the tax proposal when G-20 finance ministers meet in Venice, Italy, in July.
“The G-7’s decision on international tax justice is historic. It is very good news for tax justice and solidarity and bad news for tax havens around the world,” German said. Minister of Finances Olaf Scholz in a press release.
The tax rules specifically target multinational tech companies like Google, Facebook and Apple that have used tax havens. Governments have long wrestled with the issue of taxing large corporations that operate in various countries, but report their profits in low-tax jurisdictions like Ireland, Hungary, and the Czech Republic, while selling their products and services elsewhere. the International Monetary Fund, among other entities, defended a global minimum corporate tax rate, citing that the ease with which multinational companies can avoid paying higher taxes, combined with lower corporate tax rates over three decades, “Undermines both tax revenues and faith in the fairness of the overall tax system. The new head of the Organization for Economic Co-operation and Development, Mathias Cormann, said earlier this week that a minimum global tax rate would be a “game changer.” Big tech companies like Amazon, Apple, Facebook, Google, Microsoft, and Netflix have used legal tax evasion strategies and loopholes to save billions in taxes. A British activist group called Fair Tax Mark said the six companies saved more than $ 100 billion tax between 2010 and 2019 by such means. However, Facebook, Google and Amazon all released statements on Saturday saying they welcomed the G-7’s proposals. President Joe Biden has called for a minimum global tax rate as he seeks to raise corporate tax rates in the United States to help pay for his massive national infrastructure upgrade proposals. However, in order to appease some republicans Opposed to tax hikes, Biden reportedly proposed establishing a 15% minimum corporate tax rate in the United States rather than increasing it to 28%.
Ireland, which has a 12.5% corporate tax rate and attracted companies like Google and Facebook to locate in Dublin, opposed Biden’s plans for a global minimum tax regime. Paschal Donohoe, Irish Minister of Finance, said last month that small countries like Ireland must use tax policy “as a legitimate lever” to offset the advantages of scale, location and resources “sometimes enjoyed by large countries ”.
$ 427 billion. This is what governments around the world lose every year due to tax evasion and fraud by businesses and high net worth individuals who move their money to tax havens, with the United States losing $ 90 billion each year. , according to a report by the Tax Justice Network and the Global Alliance for Tax Justice.
Yellen pushes for global minimum tax amid Biden Infrastructure Blitz (Forbes)
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Taxpayers, beware of the global minimum corporate tax (Forbes)